Generating a Reform of the BRI from the Inside: Japan's ... · complementary market with China, Japan’s potential to reform the BRI through innovative soft law tools from the inside

DPRIETI Discussion Paper Series 19-E-076

Generating a Reform of the BRI from the Inside:Japan's Contribution Via Soft Law Diplomacy

UMIRDINOV, AlisherNagoya University of Economics

The Research Institute of Economy, Trade and Industryhttps://www.rieti.go.jp/en/

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RIETI Discussion Paper Series 19-E-076

September 2019

Generating a reform of the BRI from the inside*

~Japan’s contribution via soft law diplomacy~

UMIRDINOV, Alisher

Nagoya University of Economics

Abstract

This paper investigates whether there is space for Japan to maneuver soft law mechanisms regarding China to ensure

conformance of Belt and Road Initiative (BRI) projects to high-level standards. The author posits that with its unique

geographic position, sharp rivalry in ASEAN, and strongly intertwined and complementary market with China, Japan’s

potential to reform the BRI from the inside should not be underestimated. Rather, by stubbornly adhering to high-level

“Quality Infrastructure Investment” (QII) principles promoted by the G7 countries in the last three years, Japan has

successfully pulled China toward these principles, enabling it to endorse the notion of high-quality infrastructure in the

second BRI forum. Under Japanese presidency, the G20 Osaka summit also vastly contributed to upgrading the level and

normative content of the QII principles. Moreover, despite its soft law and less-institutional nature, effective utilization of

the Japan-China Memorandum on Business Cooperation in Third Countries can provide Japan with some new tactics that

can restrain harmful economic activities of Chinese companies in its markets. At this point, the Sino-Japanese

collaboration in Thailand’s East-West Economic Corridor Program will test whether the Chinese government is sincerely

marketing “Third Party Market Cooperation” or if it is just another futile attempt.

Keywords: BRI, FOIP, China, Japan, third party market cooperation forum, quality infrastructure

JEL classification: D23, L22, L25, M10

The RIETI Discussion Papers Series aims at widely disseminating research results in the form of

professional papers, with the goal of stimulating lively discussion. The views expressed in the papers are

solely those of the author(s), and neither represent those of the organization(s) to which the author(s)

belong(s) nor the Research Institute of Economy, Trade and Industry.

* This study is conducted as a part of a project titled, “Comprehensive Research on the Current International Trade/Investment System (pt.

IV),” undertaken at the Research Institute of Economy, Trade and Industry (RIETI). The author is grateful for helpful comments and

suggestions by Tsuyoshi Kawase, Fujio Kawashima, Takemasa Sekine, Yuka Aoyagi and Discussion Paper seminar participants at RIETI.

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Table of Contents

1. Introduction .................................................................................................................................... 2 2. Belt and Road Initiative (BRI) of China ......................................................................................... 3

2.1 Is BRI a brand new international economic order, status quo, or nothing serious? ................. 4 2.2 Core idea: Facilities connectivity ............................................................................................. 7

3. Free and Open Indo-Pacific (FOIP) Vision of Japan...................................................................... 9 3.1 The concept of Free and Open Indo-Pacific Vision ............................................................... 10 3.2 Core idea: Quality infrastructure investment ......................................................................... 10

4. FOIP-BRI cooperation in the third countries’ market .................................................................. 14 4.1 Chinese “Third party market cooperation agreement” network ............................................. 15 4.2 Normative Content of China’s 3PMCAs ................................................................................ 16 4.3 China-Japan 3PMCA and 2018 Beijing Third Party Market Cooperation Forum ................. 18

5. Conclusion .................................................................................................................................... 23

1. Introduction

China became the second biggest economy in the world, with several-trillion-dollar reserves,

without a matured legal system; however, it is now overwhelmed with overcapacity problems

and a gradually decelerating economy. Because of these challenges, China entered the second

phase of the “going out” program. An ambitious Chinese leader, President Xi Jinping, launched

the One Belt, One Road (OBOR) program, which later changed to Belt and Road Initiative

(BRI).2 BRI is a very dynamic, fast-moving, and result-oriented initiative of China. It is

dynamic because China enriches its substantive content with new elements almost every year.

It is fast-moving because Chinese policy banks are wholeheartedly supporting BRI-related

overseas infrastructure projects with a hundred billion dollars. It is result-oriented because

Chinese firms are carefully accomplishing most of the infrastructure projects showing the real

outcome.

Successful implementation of the BRI may give China the power to change its trade

and investment tide; however, currently, it seems not to challenge the International Economic

Law Framework (IEL) status quo to the extent that China feels comfortable. Using loosely

organized web soft-law instruments and adopting a flexible and cautious approach, China is

pushing its companies to secure more markets overseas. When it feels comfortable, China relies

on the existing web of International Investment Agreements, World Trade Organization rules,

free trade agreements (FTA), and Double Tax Treaties, which were concluded with the BRI

countries. They are at the maximum level for China, and it does not want to be bound by any

other international economic rules unless they serve its national interest. However, competing

with heavily government-supported Chinese companies in overseas markets is becoming a

daunting task for private companies of developed countries; the main concerns include

international lending, tied-aid (conditional trade), competitive neutrality in investment

decisions, and international tenders. However, it might be a mistake to try to contain China

through high-level standardization of IEL rules, such as the Comprehensive and Progressive

Agreement for Trans-Pacific Partnership (CPTPP), in this ongoing turbulent international

political-economic situation. Considering the welcome messages by most countries in the BRI

to China and its infrastructure projects, it seems almost a futile attempt to restrain China’s

2 In this paper, the author used the One Belt, One Road (OBOR) and Belt and Road Initiative (BRI)

interchangeably.

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unfair practices through strict treaty law obligations.3 If so, it would be imperative for “deep-

FTA-maker-multilateralist” developed nations to figure out unconventional ways to co-exist

with China in countries in the BRI.

This paper argues that policymakers and IEL scholars should consider innovative forms

of economic governance. The author believes that the only feasible way to contain China and

its grand strategy is soft law diplomacy, which can only be accomplished by Japan. With its

unique geographic position, sharp rivalry in ASEAN, and strongly intertwined and

complementary market with China, Japan’s potential to reform the BRI through innovative soft

law tools from the inside should not be underestimated. The Land of the Rising Sun has already

launched its strategy, namely Free and Open Indo-Pacific (FOIP), with quality infrastructure

investment (QII) as its flagship brand. Unfortunately, because of poor commercialization and

some administrative hesitation, the Japanese government has barely discussed it globally,

compared to the BRI.

Regardless of the abovementioned facts, the “debt-trap” problem in the BRI raised

questions regarding China’s lending practices, compelling it, a nation rather isolated because

of its “trade war” with the US, to look for a formidable partner like Japan. Japan had emerged

as an emboldened norm-setter in the recently concluded CPTPP and finally decided to seize

this opportunity to revive FOIP and QII on a new level. Introduced at the G7 Ise-Shima Summit

in 2016, the concept of QII has steadily evolved in various forums of the world, finally being

featured in the speech of the Chinese President during the Second BRI Forum in 2019. This

article concludes that although the principles of QII, adopted in the G20 Osaka summit, are a

kind of soft law in the area of transnational infrastructure connectivity, in conjunction with a

so-called third-party market cooperation mechanism with China, it can provide Japan with a

unique opportunity to raise infrastructure quality with Chinese partners in a third country

market. The Sino-Japanese collaboration in Thailand’s East-West Economic Corridor Program

for the first time will test this argument.

This discussion paper first examines BRI (2.1) and analyzes the essential part of BRI,

namely “Infrastructure connectivity” (2.2). Then, the paper presents a review of FOIP(3.1) and

examines the extent to which Japan was successful in marketing the QII (3.2). The final section

discusses China’s third party market cooperation agreement networks and assesses the current

impact and future role of the FOIP in reforming the BRI under the Sino-Japanese third party

cooperation mechanism (4), followed by the conclusion (5).

2. Belt and Road Initiative (BRI) of China

The concept and scope of the BRI are very flexible and dynamic. Initially, the BRI consisted

of two main parts: the Silk Road Economic Belt and the 21st Century Marine Silk Road. The

former includes countries in the western part of China and continues until Western Europe,

while the latter represents countries along the Pacific and the Indian Ocean and the

Mediterranean Sea. Moreover, some experts also consider the Digital Silk Road—constituting

the Third Silk Road—that complements the New Silk Road Economic Belt and 21st Century

Maritime Silk Road. For them, it is the most important of the three Silk Roads, as it creates the

digital and communications infrastructure for the other roads—which should produce much

deeper global connectivity.4 In addition, China also initiated the so-called “Polar Silk Road” to

3 Industrialized nations, including Japan, Australia, and other Asia-pacific countries, launched the CPTPP, and on

the other side of the world, EU is trying to negotiate the TTIP with the US to gain leadership in a standard setting.

However, such a treaty-based legalistic approach is limited. For instance, many developing countries have not yet

endorsed those deep FTAs, but they are gradually allowing China to ink the BRI projects successfully. 4 Belt and Road Interview Series: Don Lewis on BRI’s Legal Framework, 5 August 2018

Available at: https://beltandroad.ventures/beltandroadblog/2018/08/05/understanding-the-bri-legal-framework

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the Arctic, by developing shipping lanes opened because of global warming.5 Although there

are more than 70 BRI partner countries, there is no formal membership in the BRI. Since its

announcement, it has always been open for every country to join the club.

2.1 Is BRI a brand new international economic order, status quo, or nothing serious?

In 2019, six years of the BRI announcement by President Xi Jinping in both Kazakhstan and

Indonesia were completed. Past years were enough to generate a series of studies on BRI.

Although most studies have analyzed the political and security aspects of BRI, fortunately, the

IEL aspect has started gaining attention in recent academic debates. Simultaneously, with the

crystallization of BRI-related projects as well as policy papers of the Chinese government, it

became easier to build the theoretical framework and conduct a comprehensive legal survey on

BRI.

Most prominently, Guiguo Wang, a leading Chinese scholar of international law and

the Head of the International Academia of the Belt and Road in Hong Kong, outlined the BRI

and its relationship with general international law and later on with IEL.6 In his 2016 paper

presented at Chuo University in Japan, Wang depicted BRI as the production of market-based

globalization, resulting from overcapacity problems in China.7 Chaisse and Matsushita referred

to the BRI as a “titanic project” promoted by China for the “construction of a new major

commercial axis.”8 Inspired by policy papers of the Chinese government, Chinese scholars are

also rushed to articulate theoretical foundations of the BRI and legitimize it for the wider public,

addressing the BRI from an “international public goods perspective.”9 Zou and Qiu argued that

the inherent elements of the “concept of the common heritage of mankind,” such as co-

management, co-benefit, and co-participation, are well reflected in the BRI.10 Considering the

ambitious plans of the BRI, such as the harnessing and application of big data to directly solve

environmental challenges and providing basic internet access for more than 3 billion people

who still have no internet connectivity, Chinese scholars’ argument is not entirely unfounded.11

The 2018 and 2019 years also saw several attempts to thematically read the BRI in

tax, 12 international private law, 13 the rule of law, 14 and other comprehensive and

interdisciplinary works as well.15 However, the fundamental problem was still unanswered:

5 Reuters, (2018) ‘China unveils vision for ‘Polar Silk Road’ across Arctic’, January 26. 6 According to some sources, professor Wang is currently working on the Code of BRI that lay out principles the

BRI projects should be conducted. Concrete time of completion as well as endorsement of such code by Chinese

leaders however is not yet clear. 7 Guiguo Wang, (2016) The Belt and Road Initiative from the Perspective of Contemporary International Law,

Hikakuho Zasshi (Comparative Law Review), 50(3), p.19. 8 Julien Chaisse and Mitsuo Matsushita (2018), ‘China’s ‘Belt and Road’ Initiative: Mapping the World Trade

Normative and Strategic Implications’, Journal of World Trade, 52(1), 163-185, p.165. 9 Jinhxia Shi, The Belt and Road Initiative and International Law: An International Public Goods Perspective, in

Yun Zhao (ed), International Governance and the Rule of Law in China under the Belt and Road

Initiative (Cambridge University Press, 2018), pp.9-31. 10 Zou, Keyuan and Qiu, Wenxian (2018) The Belt and Road Initiative and the Common Heritage of Mankind:

Some Preliminary Observations. Chinese Journal of International Law, 17 (3). pp. 749-756. 11 See Winston Ma Wenyan, Could a Digital Silk Road solve the Belt and Road's sustainability problem?19

September 2018. Available at: https://www.weforum.org/agenda/2018/09/could-a-digital-silk-road-solve-the-

belt-and-roads-sustainability-problem/ 12 Michael Lang and Jeffrey Owens (eds), Removing Tax Barriers to China’s Belt and Road Initiative (Kluwer

Law International, 2018). 13 Poomintr Sooksripaisarnkit, Sai Ramani Garimella (eds), China’s One Belt One Road Initiative and Private

International Law (1st Ed, Routledge, 2018) 14 Yun Zhao, supra note 9. 15 See Julien Chaisse and Jędrzej Górski (eds), The Belt and Road Initiative: Law, Economics, and Politics (Brill,

2018); Wenhua Shan, Kimmo Nuotio, Kangle Zhang (eds.), Normative Readings of the Belt and Road Initiative:

Road to New Paradigms (Springer, 2018).

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whether BRI will be a next deep FTA and if not, then to what extent it will be compatible with

IEL? Actually, from the very beginning, China’s policy on the BRI, referred to as the “Vision

and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk

Road” (2015 Action and Vision Plan) described the BRI as the provider of “new models of

international cooperation and global governance.” 16 Accordingly, in 2016, Guiguo Wang

prophesized that contrary to previously belief, the BRI would not be an FTA in a conventional

way. The research conducted by his academy elaborated as follows:

“One Belt and One Road” is a Chinese initiative to develop international economic and trade

relations. Therefore, when discussing its relationship with international law, the Chinese

position on international law must be taken into account. The “One Belt and One Road”

Initiative will probably operate under an international order that reflects the Chinese position,

including China’s viewpoints and statements, and will rely on the effective protection of such

order.17

Table 1. Overview of China’s 2015 Vision and Action Plan for BRI

Basic principles: open cooperation, harmonious and inclusive, market operation, mutual

benefit

Five

Priorities of

Cooperation

Policy coordination

promote intergovernmental cooperation, building a

multi-level intergovernmental macro policy

exchange and communication mechanism,

expanding shared interests, enhance mutual

political trust, and reaching new cooperation

consensus

Facilities

connectivity

improve the connectivity of infrastructure

construction plans and technical standard systems

in transport, energy, and international

communication fields

Unimpeded trade

improve investment and trade facilitation, enhance

customs cooperation, improve the customs

clearance facilities, increase cooperation in supply

chain safety and convenience, lower non-tariff

barriers, jointly improve the transparency of

technical trade measures, enhance trade

liberalization and facilitation, support localized

operation and management of Chinese companies

Financial integration

expand the scope and scale of bilateral currency

swap and settlement, open and develop the bond

market in Asia, establish the AIIB and BRICS New

Development Bank, conduct negotiation among

related parties on establishing Shanghai

Cooperation Organization (SCO) financing

institution, and set up and put into operation the

Silk Road Fund, strengthen practical cooperation

16 ‘Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime Silk Road’ 28

March 2015, Issued by the National Development and Reform Commission, Ministry of Foreign Affairs, and

Ministry of Commerce of the People's Republic of China, with State Council authorization, First Edition 2015.

Available at: http://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html 17 ‘One Belt and One Road’ and International Law: A Chinese Perspective. Available at:

http://interbeltandroad.org/learning_space/one-belt-and-one-road-and-international-law-a-chinese-perspective/

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of China-ASEAN Interbank Association and SCO

Interbank Association

People-to-people

bond

send students with Chinese scholarships to each

other’s countries, promote cooperation in jointly

running schools, hold culture years, arts festivals,

film festivals, TV weeks and book fairs in each

other's countries; enhance cooperation in and

expand the scale of tourism, carry out sports

exchanges, provide medical assistance and

emergency medical aid, increase our cooperation

in science and technology Source: the author’s summary based on 2015 Visions and Actions Plan of BRI (1st edition)18

Therefore, it can be assumed that China wants something else. More recently, well-known IEL

scholars, Chaisse, and Matsushita presented the following conclusion:

OBOR is not a new type of FTA, and neither is it a competitor to the WTO or the TPP; OBOR

is a radically new approach towards international trade and investment in a turbulent (trade)

time.19

While they posited the possibility of the emergence of the common market or a new type of

FTA, for them it is premature to postulate on the BRI’s future at this moment.20 Contrary to

their view, Heng Wang argued that the BRI could constitute a kind of Chinese counter-model

to strengthen trade agreements promoted by industrialized nations.21 However, Wang also

agreed with the above authors that the BRI may grow into a legal framework or remain as an

open forum. According to him, due to the vast numbers of states in the BRI, and also its diverse

interest (preferring investor-state dispute settlement rather than labor rights), China

intentionally gave priority to flexibility and elasticity over predictability, consistency, and rule

enforcement. 22 In addition to him, Jaemin Lee described the BRI as a “new scheme for

international economic cooperation” that is different and/or independent of trade liberalizing

FTAs.23 For him, BRI’s goal is different from that of FTAs: while the FTAs pursue integrated

market with trade and investment liberalization, the BRI focuses on the construction of specific

infrastructure projects that help parties facilitate speedy transport of goods and services and

ultimately increases connectivity between each other.24Accordingly, while scholars are united

on the different nature of the BRI compared to the FTA in its organizing principles and modes

of connectivity,25 they have not reached a unanimous standpoint whether it competes against

strong FTAs or not.

Nonetheless, from an economic point of view, the success of BRI in Asia, Africa, and

Europe would sooner or later change the tide of trade, investment, and service toward China.

Then, emerging as a winner, this factor may enable China to re-write or at least lead the revision

18 2015 Action and Vision Plan, supra note 16. 19 Chaisse and Matsushita, supra note 8, at 167. 20 Id. at 185. 21 Heng Wang, (2019) China’s Approach to the Belt and Road Initiative: Scope, Character and Sustainability,

Journal of International Economic Law, 22 (1), pp. 29–55, 55. 22 Id. 23 Jaemin Lee, The Belt and Road Initiative under Existing Trade Agreements: Some food for thought on a New

Regional Integration Scheme, in Yun Zhao, supra note 9. at 59-60. 24 Id. at 61-62. 25 See Alice D.Ba, ‘TPP, OBOR and ASEAN: Where Will They Lead To?’ RSIS Commentary, No.108, 11 May

2016. Available at: https://www.rsis.edu.sg/wp-content/uploads/2016/05/CO16108.pdf

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of global economic rules for its benefit. If that time arrives, the concept of BRI will probably

fade away,26 but the power it presents to China will compete against that of current strong

FTAs.

Table 2. Comparison of the BRI with strong and conventional FTAs

Strong and conventional FTAs BRI

Continuous economic cooperation in trade,

investment, and service fields

Series of infrastructure and cultural projects

Singular homogenizing framework (connects

different economies around common rules,

common regulatory approaches)

Multi-component framework (connects

diverse parts, piece by piece, via their

common interest in national development)

Private initiatives are emphasized Both the role of government and public

initiatives are vital factors

Private companies SOEs or national champions with the strong

back-up of China

First rulemaking; second, development Rulemaking and development co-

occur/proceed parallel with each other

Free market and free enterprise philosophy A mix of government and private initiatives

Participation is limited with a clear timetable Open-ended framework/forum and open to

everyone, anytime

Members are active participants China is the chief financier, initiator

(provocateur), and coordinator

Treaty-based: strictly defined, with (robust)

implementation and dispute settlement

mechanism

Non-treaty based: loosely defined soft law

instruments, no enforcement monitoring and

dispute settlement mechanism

Institutionally focused Less institutionally focused

Settled, static (except occasional revisions),

and predictable

Flexible, dynamic, and future is incalculable

(navigating in uncharted seas)

Aims high-level market access with a deep

intrusion of state sovereignty in trade,

investment, and service sectors

Based on China’s market conditions, aims to

gain market access, trade facilitation and

export infrastructure, and industrial zones

Emphasizes corporate social responsibility,

responsible investment, and transparency

Depends on host state’s legal environment,

but generally avoids emphasizing corporate

social responsibility, responsible investment,

and transparency

Bilateral, plurilateral, and multilateral Mostly bilateral or group+1

Source: Ba (2016), Chaisse/Matsushita (2018), Wang (2019), and the author’s observations.

2.2 Core idea: Facilities connectivity

As shown in Table 1, the BRI has five priorities of cooperation, of which “facilities

connectivity” has top priority. China considers an insufficient infrastructure investment is a

bottleneck for economic development in developing countries. Therefore, it aims to accelerate

26 Belt & Road Advisory, Belt and Road Interview Series: Gordon Orr, 17 June 2018. Available at:

https://beltandroad.ventures/beltandroadblog/2018/6/16/belt-and-road-interview-series-gordon-orr

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connectivity of infrastructure as a key area and core goal of the Belt and Road Initiative.27 If

successfully implemented, six major corridors - the New Eurasian Land Bridge, and the China-

Mongolia-Russia, China-Central Asia-West Asia, China-Indochina Peninsula, China-Pakistan,

and Bangladesh-China-India-Myanmar economic corridors—should connect the Asian

economic circle with the European economic circle in the future. China is actively financing

railway, road, port, air transport, energy, and communication facilities alongside these

corridors.

Table 3. The list of completed BRI infrastructure projects

Railways China-Laos Railway, China-Thailand Railway, Hungary-Serbia Railway,

and Jakarta-Bandung High-Speed Railway

Roads China-Mongolia-Russia, China-Kyrgyzstan-Uzbekistan, China-Russia

(Dalian-Novosibirsk), China-Viet Nam roads

Ports Pakistan’s Gwadar Port, Sri Lanka’s Hambantota Port, Port of Piraeus in

Greece, Khalifa Port Container Terminal Phase II in the United Arab

Emirates

Air transport 1,239 new international routes have opened between China and other BRI

countries, accounting for 69.1 percent of the total of China's new

international routes over that period

Energy

facilities

China-Russia crude oil pipeline, China-Central Asia natural gas pipeline,

China-Russia natural gas pipeline, China-Myanmar oil and gas pipelines

Communication

facilities

China-Myanmar, China-Pakistan, China-Kyrgyzstan, and China-Russia

cross-border fiber optic cables for information transmission Source: The Belt and Road Initiative Progress, Contributions and Prospects 2019 Report.

Since the early days of the BRI, for its successful implementation, Guiguo Wang raised

harmony of the BRI with the existing framework of international economic treaties and

agreements that is echoed in a number of other studies.28 In the 2015 Vision and Action Plan,

China urged countries to “speed up investment facilitation, eliminate investment barriers, and

push forward negotiations on bilateral investment protection agreements and double taxation

avoidance agreements to protect the lawful rights and interests of investors.”29 China is now

actively seeking the conclusion of high-level BITs with its partners in the world.30

On the other hand, being a passive player in a legally binding rulemaking, China has

been taking a strategic non-treatification policy toward critical economic issues associated

with the BRI. If China is delaying its membership to WTO Government Procurement

Agreement in the domestic market, in the overseas market, its low level of accountability for

sovereign loans, corporate social responsibility of Chinese companies that are participating in

building BRI and subsidizing its companies’ going out strategy with various competitively

non-neutral ways are posing significant problems for conventional players of global economy.

For flexibility, China is strategically avoiding treaty-based legal frameworks that levy

27 See ‘The Belt and Road Initiative: Progress, Contributions and Prospects,’ Report, the Office of the Leading

Group for Promoting the Belt and Road Initiative, April 22, 2019. Available at:

https://eng.yidaiyilu.gov.cn/zchj/qwfb/86739.htm 28 Wang, supra note 7, at 17. See also Lee, supra note 8, at 59-80. 29 Although that may be true to some extent, given the fact that after the announcement of the BRI in 2013, Chinese

investors have not initiated any single investment treaty case against countries in the BRI, except one against

Yemen in 2014, which has already been settled by parties, may cast doubts on the usefulness of concluding BITs

by or with China. See Beijing Urban Construction Group Co. Ltd. v. Republic of Yemen (ICSID Case No.

ARB/14/30). 30 See Jinhxia Shi, The Belt and Road Initiative and International Law: An International Public Goods Perspective,

in Yun Zhao, supra note 9. at 28.

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burdensome obligations.31 China relies on soft law instruments such as extensive consultation,

shared benefits, letters of intent, memorandum of understandings (MoU), and joint contribution,

which is a weak and vague form of global governance.32 The list of hundreds of deliverables

of the Second BRI Forum also vividly shows the scale of soft law and political instruments

China relies on pushing the BRI agenda in the world.33

An incompatibility with high-level international standards can be considered the second

problematic aspect of “facilities connectivity.” Since the beginning, China has avoided setting

a clear benchmark for financing the BRI infrastructure projects. Because of China’s “tied-aid”

financing practices (that are ignorant of the financial condition of recipient countries) provided

mainly to Chinese SOEs, which, in turn, employ Chinese labor forces in overseas markets,

made many countries question whether China wants open, sustainable, bankable, and

transparent infrastructure connectivity. Of the 65 initial countries in the BRI, eight began

experiencing increasing stress because of BRI-related Chinese debt.34 Furthermore, when the

Sri Lankan government agreed to transfer the management of the strategic Hambantota port to

a Chinese company for 99 years,35 and Tajikistan did the same for gold and silver mining rights,

eyebrows rose around the globe about the sincerity of China on BRI.36 Concerned about this

“debt trap” problem, Myanmar, Malaysia, and Pakistan began re-negotiating, freezing, or even

canceling several expensive projects previously proposed by the Chinese SOEs. 37 This

phenomenon even led the harshest critic of the BRI, the United States (US), to name China’s

initiative as a “bribe-fueled debt-trap diplomacy” that undermines good governance

worldwide.38

3. Free and Open Indo-Pacific (FOIP) Vision of Japan

Although BRI is gaining attention worldwide because of success and failures, not many have

paid serious attention to China’s close neighbor, sharp rival, and the third largest economy in

the world—Japan. It launched its BRI-competitor in 2014, the so-called FOIP. Initially, Japan

31 Scholars like Heng Wang also raised this question earlier in 2019, describing BRI as a “non-treaty based

approach” of China, which shows a “passiveness in engagement with sensitive aspects.” He further notes that,

“The use of soft law in the BRI is largely attributable to the decentralized nature of the BRI and the difficulties of

concluding hard law with the large number of BRI states. There is no clear center for rule-making, central

institution or a BRI-wide treaty under the BRI. Existing treaties are insufficient to address investment issues. …..

It is difficult for BRI states to agree on binding treaty obligations due to legal, political, economic and social

differences. It is easier to conclude soft law than hard law, since soft law avoids the complexity of treaty

ratification.” See Wang, Heng. (2018) ‘Divergence, Convergence or Crossvergence of Chinese and US

Approaches to Regional Integration: Evolving Trajectories and Their Implications.’ Tsinghua China Law

Review10.2, 149-185, p.156. 32 Also see Remarks by Ambassador Lu Shaye at the Canadian National Exhibition Belt and Road Forum, Chinese

Embassy in Canada, August 31, 2018. Available at:

https://www.fmprc.gov.cn/mfa_eng/wjb_663304/zwjg_665342/zwbd_665378/t1590197.shtml 33 List of Deliverables of the Second Belt and Road Forum for International Cooperation, April 27,

2019. Available at: http://www.beltandroadforum.org/english/n100/2019/0427/c36-1312.html 34 See John Hurley et al. (2018) ‘Examining the Debt Implications of the Belt and Road Initiative from a Policy

Perspective,’ CGD Policy Paper 121. 35 Go Yamada and Stefania Palma, ‘Is China’s Belt and Road working? A progress report from eight countries:

Beijing’s infrastructure push clouded by project delays and mounting debt,’ Cover story, Nikkei Asian Review,

March 28, 2018. 36 Eurasianet, Tajikistan hands Chinese company rights to silver reserves, June 21, 2019. Available at:

https://eurasianet.org/tajikistan-hands-chinese-company-rights-to-silver-reserves 37 Nihonkeizaishimbun, ITTAIICHIRO SHUKUSHO, TETSUDOYA KOUWAN, SEIBIHI SAKUGEN,

TAICHUU SAIMUKYUZOUNI KEIKAI, [BRI is shrinking, cutback in railroads and ports’ costs, precaution

towards Chinese debts ], October 12, 2018. 38 See Belt and Road Portal, ‘China warns US over BRI criticism,’ May 13, 2019. Available at:

https://eng.yidaiyilu.gov.cn/qwyw/rdxw/89801.htm

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was hesitant about marketing this strategy. Nonetheless, it seems that Japan—emboldened by

the success of the CPTPP, learning from the BRI failures, and with the beginning of the US

retreatment in Asia—finally decided to take the big stage with its brand. The author now

explores the Japanese version of the infrastructure export policy under the aegis of the FOIP

strategy and its challenge and synergy with the BRI through the lens of QII and third-party

market cooperation mechanism, respectively.

3.1 The concept of Free and Open Indo-Pacific Vision

Although little is known, Japan also began developing its regional connectivity foreign policy

strategy under Prime Minister Shinzo Abe. The FOIP aims to “‘improve connectivity’ between

Asia and Africa through free and open Indo-Pacific, and, with ASEAN as the hinge of two

oceans, promote stability and prosperity of the region as a whole.”39 The real architect of the

FOIP concept, however, is Abe, who unveiled the idea in mid-2016 in Nairobi, during the Sixth

Tokyo International Conference on African Development; when he first introduced this

concept, he described it as a way for promoting shared values such as the rule of law and free-

market economies throughout the region.

Similar to China’s change from OBOR to BRI, Japan has also softened its tone on the

FOIP because of objections from ASEAN members. During his meeting with the Malaysian

prime minister, Abe intentionally chose the word “vision” instead of “strategy.”40 Therefore,

in November 2018, it was positioned as a priority policy for cooperation development, as the

“Free and Open Indo-Pacific vision.”41

The FOIP consists of three pillars: first, promotion and establishment of the rule of law,

freedom of navigation and free trade; second, the pursuit of economic prosperity (improving

connectivity); and the third, commitment for peace and stability. Among the specifics of the

FOIP, pursuing economic prosperity by improving “connectivity” through infrastructure

development, such as ports and railways, occupies a special place. Initially, it had two elements,

one was improving “connectivity” in ASEAN (East-West Economic Corridor, Sothern

Economic Corridor, etc.), within South West Asia (North East Connectivity Improvement

Project in India and Bengal Bay Industrial Growth Zone, etc.) and from South East Asia to

southeast Africa through South West Asia and the Middle East (Mombasa Port, etc.). The

second one was strengthening economic partnership (including investment treaties) and

improving the business environment.42 However, according to a recently updated pamphlet of

the FOIP, Japan has added “People-to-people connectivity” as a third sub-division of the

FOIP’s economic pillar. This shows that China’s BRI is enriching the Japanese version of

infrastructure development as well.

3.2 Core idea: Quality infrastructure investment

Japan was already ahead of China’s BRI when it came to the idea of driving regional prosperity

by achieving greater access to markets via infrastructure. Concerned about losing its position

as the dominant donor, with the careful eye on the rise of the BRI, and with bitter experiences

39 A New Foreign Policy Strategy: ‘Free and Open Indo-Pacific Strategy’. Available at: https://www.asean.emb-

japan.go.jp/files/000352880.pdf 40 Yukio Tajima, ‘Abe softens tone on Indo-Pacific to coax China’s ASEAN friends,’ Nikkei Asia Review,

November 13, 2018. 41 Accordingly, in January 2019, the webpage of the Ministry of Foreign Affairs of Japan for the FOIP also

changed its title from Strategy to Vision. Available at: https://www.mofa.go.jp/files/000407643.pdf 42 A New Foreign Policy Strategy: ‘Free and Open Indo-Pacific Strategy’. Available at: https://www.asean.emb-

japan.go.jp/files/000352880.pdf

11

against China,43 Japan also developed its infrastructure export strategy: The QII. The strategy

aimed to specifically addressing the concerns expressed by third countries regarding the BRI,

namely, transparency, sustainability, and community engagement with projects.44

To pursue the FOIP, under the leadership of Abe, the Japanese government

launched the Partnership for Quality Infrastructure in May 2015 as part of the Japan

Revitalization Strategy. 45 The 2015 Partnership for QII was later upgraded as the

“Expanded Partnership for Quality Infrastructure” in May 2016 during the G7 Ise-Shima

Summit, to finance infrastructure projects of approximately US$ 200 billion across the

Indo-Pacific over the next five years (2017-21). 46 Creating new engines for Japan’s

economic development by exploring new frontiers of growth in the international

infrastructure market is one of the main aims of the expanded partnership.

In contrast to the BRI&Facilities connectivity nexus, the most distinctive part of

FOIP&QII is the guiding standards that it adopted. The Japanese government is very keen on

promoting the development of high-quality infrastructure in Asia, Africa, and Latin America

under the rules of openness, transparency, economic efficiency given life-cycle cost, and fiscal

soundness, including debt sustainability of the recipient countries. Different from other donors

like China, Japan raised the high-quality infrastructure to its brand, promoted following

standards as an international one, and urged for rulemaking on quality infrastructure in forums

such as G7, G20, and the OECD club.47

The concept has evolved in recent years in the following order. Beginning in 2014 with

the Brisbane and Antalya G20 Summits in 2015, the G7 Ise-Shima Principles for Promoting

Quality Infrastructure Investment of 2016 named five principles that cover governance,

economic efficiency, resilience, job creation, capacity building, social and environmental

impacts, alignment with economic and development strategies, and effective resource

mobilization.48 In particular, it emphasized sustainability and reliable operation of quality

infrastructure during the life span of a project, and transfer of expertise and know-how to local

communities. Moreover, being quite concrete in terms, the G7 Ise-Shima principles articulated

debt sustainability and fiscal outlook.

Three months after the G7 Ise-Shima Summit, the leaders of the G20 met in Hangzhou,

China, held on 4-5 September 2016, reaffirmed their commitment to promote investment, with

focus on infrastructure in terms of both quantity and quality. They particularly stressed,

“the importance of quality infrastructure investment, which aims to ensure economic efficiency

in view of life-cycle cost, safety, resilience against natural disaster, job creation, capacity

building, and transfer of expertise and know-how on mutually agreed terms and conditions,

43 Indonesia and its Jakarta-Bandung railway project is the best example of the competition between the two

countries. In 2015, bidding against Japan, China was selected to construct the Jakarta-Bandung railway section,

while Japan was to upgrade the railway that connects Jakarta with Surabaya. 44 Andre Wheeler, Japan’s trade engagement with China – is Myanmar a case study? Nov 01, 2018. Available at:

https://www.joc.com/regulation-policy/trade-policy/international-trade-policy/japan’s-engagement-china-–-

myanmar-case-study_20181101.html 45 MOFA, Announcement of “Partnership for Quality Infrastructure: Investment for Asia's Future”, May 21, 2015.

Available at: https://www.mofa.go.jp/policy/oda/page18_000076.html 46 MOFA, ‘The “Expanded Partnership for Quality Infrastructure” initiative directed toward the G7 Ise-Shima

Summit Meeting announced’. Available at: https://www.meti.go.jp/english/press/2016/0523_01.html 47 See Kentaro Sonoura, ‘Japan’s initiatives for promoting “Quality Infrastructure Investment”’, UN General

Assembly High-Level Side Event: Promoting Quality Infrastructure Investment, 19 September 2017. Available

at: https://www.mofa.go.jp/files/000291344.pdf. See also UN General Assembly High-Level Side Event:

“Promoting Quality Infrastructure”

(Co-hosted by Japan, the European Commission and the United Nations), September 26, 2018. Available at:

https://www.mofa.go.jp/ic/dapc/page6e_000130.html 48 “G7 Ise-Shima Principles for Promoting Quality Infrastructure Investment”, May 2016.

12

while addressing social and environmental impacts and aligning with economic and

development strategies.”49

The above was an almost literal repetition of what Japan achieved in the G7 summit.

Notwithstanding this fact, QII was still a vague notion in the international arena wherein it

should be greatly articulated. Without stopping at the G7 Ise-Shima and G20 Hangzhou

summits, Japan steadfastly continued QII diplomacy. Although G20 Leaders’ Declaration at

Buenos Aires in 2018 was limited to an assurance to the issue, stating “we look forward to

progress in 2019 on quality infrastructure”50; nonetheless, the G20 Osaka Summit in June 2019

provided a historical opportunity to Japan, to globally diffuse and carefully calibrate the content

of QII. Strategically using this moment for the promotion of quality infrastructure, Japan

further cemented its position by adopting the “G20 Principles for Quality Infrastructure

Investment” (G20 Principles) as a top document in the summit.

As mentioned at the very the top, the document sets out voluntary and non-binding

principles to reflect common strategic direction and aspiration for a quality investment.

Nonetheless, compared to previous efforts of Japan in Ise-Shima and Hangzhou, the G20

Principles of Osaka are very far-reaching and ambitious. It seems that Japan, with the help of

the European Union (EU) and US, as well as other members of the QUAD (Australia, and

India), could insert vital principles for infrastructure projects, such as “transparency,”

“accountability,” and “debt sustainability.”

Concerning this topic, Principle No. 6 is most crucial. In the preamble of this principle,

G20 leaders firmly announced that:

“Sound infrastructure governance over the life cycle of the project is a key factor to ensure

long- term cost-effectiveness, accountability, transparency, and integrity of infrastructure

investment. Countries should put in place clear rules, robust institutions, and good governance

in the public and the private sector, reflecting countries’ relevant international commitments,

which will mitigate various risks related to investment decision-making, thus encouraging

private-sector participation. Coordination across different levels of governments is needed.

Capacity building is also key in ensuring informed decision-making and effectiveness of anti-

corruption efforts. In addition, improved governance can be supported by good private sector

practices, including responsible business conduct practices.”

Notably, the above Principle laid out the following four main sub-principles: First, G20

Leaders agreed that openness and transparency of procurement should be secured to ensure

that infrastructure projects are value for money, safe, and effective, and therefore investment

is not diverted from its intended use. Second, to assess the financial sustainability of each

project and identify potential infrastructure projects subject to limited financial means, well-

designed and well-functioning governance institutions should be in place. Third, combined

with enhanced transparency, anti-corruption efforts should continue to safeguard the integrity

of infrastructure-related investments. Fourth, support investment decision-making, and project

management, access to adequate information, and data is an enabling factor.

There are three noteworthy points here: First, the G20 Principles on QII are a milestone

in shaping international soft laws in the field of sustainable infrastructure investment. To

address debt-trap issues, the document requires (using word “should”) open, fair, and

transparent procurement system, involvement of wide range of stakeholders, facilitation of

well-functioning government institutions, using the measures to mitigate corruption at all

49 G20 Leaders’ Communique Hangzhou Summit, September 5, 2016, G20 Information Centre, para.39

Available at: http://www.g20.utoronto.ca/2016/160905-communique.html 50 G20 Leaders’ Declaration: Building Consensus for Fair and Sustainable Development, December 1, 2018, G20

Information Centre. Available at: http://www.g20.utoronto.ca/2018/2018-leaders-declaration.html

13

stages of infrastructure project and places the access to adequate information and data as a

benchmark for decision-making and project management. In addition to the above standards,

the G20 Principles also strongly demand that the donor states align proposed infrastructure

projects with national strategies and consider country circumstances.

China’s stance toward the G20 Principles is another critical point. Until now, there is

no inter-state document of the G20 Summit, which includes that China has never adopted such

a strong-worded (soft) commitment on the sustainability of infrastructure. China’s willingness

to adopt such principles at the global forums, like G20 summit reflects an awareness of

international criticism of its investments in infrastructure. According to Japanese officials

involved in the negotiations on the principles, China was initially cautious about the new

principles; however, now, it has become more accepting of the idea as it recognized the

economic and financial benefits of promoting high-quality infrastructure.51

The final point is that since QII has also gained broad support among other international

stakeholders, it provides an opportunity to strengthen this soft law in the future. Some reports

of international development banks have described “quality infrastructure” as an element of

sustainable infrastructure.52 By emphasizing transparency, openness, economic efficiency, and

fiscal soundness, APEC issued a revised Guidebook on Quality Infrastructure Development

and Investment in 2018.53 There are also various reference points in the world, including the

Global Infrastructure Hub that announced “Quality Infrastructure Investment’ Casebook.”54

Along with the G20 Summit in Osaka, the OECD, and the IMF prepared the Reference Note

jointly which aligned to the G20 Principles for QII as part of the 2019 G20/Infrastructure

Working Group Agenda.55 In addition to the G7, G20, and OECD Ministerial Council Meeting

in 2017, the UN 2030 Agenda for SDGs also focused on the importance of quality

infrastructure among its 17 Sustainable Development Goals. 56 Being an innovative and

experimental measurement tool for sustainable development, QII brand of Japan can be a

powerful instrument to upgrade infrastructure lending in the developing world. In this way, the

soft law diplomacy of Japan on quality infrastructure has reshaped international economic

governance of infrastructure connectivity. Consequently, President Shi during the 2019 BRI

summit officially endorsed some of the principles.57

Due to its flexible, informal, and elastic nature, soft law provides a comparatively

relaxed environment for global consensus-building on ruling making among major countries.

As a result of the G20 member countries’ effort in the last five years, including Japanese

endeavor, international soft law-making on collective mechanisms for transport connectivity

51 Tetsushi Kajimoto, ‘World’s top economies lay out principles on debt sustainability at G20 meet,’ Reuters,

June 9, 2019. 52 See Inter-American Development Bank, IDB Invest, ‘What Is Sustainable Infrastructure?: A Framework to

Guide Sustainability Across the Project Cycle,’ Technical Note:IDB-TN-1388, March 2018, p.10. 53 APEC Guidebook on Quality of Infrastructure Development and Investment (Revision), November 12, 2018.

Available at: http://mddb.apec.org/Documents/2018/SOM/CSOM/18_csom_014app11.pdf 54 ‘Quality Infrastructure Investment’ Casebook. Available at:

https://www.gihub.org/resources/publications/quality-infrastructure-investment-casebook/ 55 See OECD/IMF Reference Note on the Governance of Quality Infrastructure Investment, June 2019. Available

at: https://www.mof.go.jp/english/international_policy/convention/g20/annex6_5.pdf 56 Especially see Goal 9: Build resilient infrastructure, promote sustainable industrialization and foster innovation:

9.1 Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder

infrastructure, to support economic development and human well-being, with a focus on affordable and equitable

access for all. Available at: https://www.un.org/sustainabledevelopment/infrastructure-industrialization/ 57 Furthermore, China has recently adopted ‘Guiding Principles on Financing the Development of the Belt and

Road’, ‘The Belt and Road Ecological and Environmental Cooperation Plan’ and ‘Guidance on Promoting Green

Belt and Road’. Available at: https://eng.yidaiyilu.gov.cn

14

has advanced.58 Its content is vastly clarified, concretized by references notes and procurement

practices by multilateral development banks, and normative significance has increased. Most

importantly, G20 countries successfully brought China under this soft law mechanism as a

responsible player.59 Although the QII as a soft law lacks stringent enforcement mechanism at

present, being carefully negotiated and drafted, it can be considered an important step forward

for incremental formation of the opinion juris that generates customary law of transnational

connectivity infrastructure. As frequently observed in international financial law, an

evolutionary process of soft law opens the way for transforming the G20 QII principle into

hard treaty law in the future.

The only problem in this innovative soft law is its enforcement. Therefore, the

application of the principle of quality infrastructure by a critical emerging player in

infrastructure investment, especially China in the host countries, must be examined, because

without the capability of being binding, the willingness of China to comply with QII in the

overseas market plays a major role in strengthening the normative force of QII. Moreover,

because of China’s unique approach toward Japan, the QII brand has already found its way to

reform China’s way of promoting the BRI in the third countries. Section 4 will focus on this

issue.

4. FOIP-BRI cooperation in the third countries’ market

China wishes to enlist the help of developed countries’ in the overseas Belt and Road

infrastructure projects as well as of the BRI-related financial institutions, such as the Asian

Infrastructure and Investment Bank. China hopes that bringing countries like Japan on board

will let it dodge accusations of practicing a new form of colonialism through foreign aid.60

Furthermore, despite the launch of competing initiatives by the most prominent investors, there

were some calls for both parties to establish an effective mechanism for coordination and

dialogues on the regional connectivity within South East Asia.61

At the beginning, Japan’s position was not evident in this respect: it showed neither

interest nor reaction toward the BRI.62 Finally, in July 2017, Japan announced that it would

consider the possibility of becoming involved in BRI-related initiatives and projects if the latter

met four preconditions. For Japan to collaborate with China-led BRI projects, they must be

characterized by (1) openness; (2) transparency; (3) economic sustainability; and (4) the ability

of the developing countries involved to claim financial ownership over the projects in question.

In other words, Japan has made it clear that any official support would be limited and

conditional, dependent on the projects satisfying the “quality infrastructure” principles.

After the Chinese prime minister visited Japan in May 2018, both parties came up with

the so-called “Third Party Market Cooperation,” a slightly more neutral name for what Chinese

media often bluntly refers to as Japan’s “participation in the Belt and Road Initiative.” To

58 See Chapter 2. Strategies and activities of development partners for transport connectivity, OECD, Enhancing

Connectivity through Transport Infrastructure: The Role of Official Development Finance and Private Investment,

The development Dimension, OECD Publishing, 2018, pp.49-59. 59 Daniel Runde, ‘Pursuing Quality of Infrastructure for Sustainable Growth,’ Think 20, March 8, 2019, p.7.

Available at:https://t20japan.org/policy-brief-pursuing-quality-of-infrastructure-for-sustainable-growth/ 60 Oki Nagai, ‘China and Japan kick off joint effort on foreign infrastructure,’ Nikkei Asian Review, September

26, 2018. 61 See Zhao Hong, ‘Chinese and Japanese infrastructure investment in Southeast Asia: from rivalry to

cooperation?’ IDE Discussion Paper, No.689, February 2018. Available at:

https://www.ide.go.jp/English/Publish/Download/Dp/689.html 62 See China Focus, ‘High-level Interview with Masahiro Kawai: How Has Japan Embraced the Belt and Road

Initiative？’, April 26, 2019. Available at: http://www.cnfocus.com/high-level-interview-masahiro-kawai-how-

has-japan-embraced-the-belt-and-road-initiative/

15

evaluate, while Tokyo’s decision to consider cooperating with China on the BRI could make

economic sense for its companies seeking additional markets,63 Tokyo would also gain the rare

opportunity to hold China to higher levels of transparency and accountability.64 In other words,

conducting joint projects with the Japanese may encourage China to embrace higher

standards. 65 Furthermore, such selective engagement with China on the third countries’

infrastructure projects opens the way for gaining information as well as encourages the Chinese

side to align more with high-level international standards.66 Simultaneously, this collaboration

will also test the critics of the BRI who now have a template that uses collaborative financing

instruments to make the BRI more universally acceptable than China-centric.67

4.1 Chinese “Third party market cooperation agreement” network

China’s third-party market cooperation agreement (3PMCA) can be considered a loosely

designed soft law instrument. It aims to facilitate cooperation between investors of both

countries and provide a level playing field in the third markets. As one Chinese ambassador

expressed, for China, the cooperation in third-party markets is meant to align its productivity

with technologies of developed countries, with the development demand of developing

countries.68 Although Chinese scholars assert that cooperation in third-party markets as a new

model of international cooperation initiated by China, 69 actually these types of soft law

instruments are not brand new.70 Nevertheless, the coverage of China’s 3PMCA is far greater

than any other country’s similar network. To date, China has succeeded in concluding these

types of agreements with more than 10 developed nations: beginning with France (2015),

Canada (2016), New Zealand (2017), Belgium (2018), Portugal (2018), Singapore (2018),

63 See Joji Uramatsu and Kiyohiro Akama, China General Bureau, and Shinichi Nishiwaki, Asia General Bureau,

‘Japan firms hopping on modern Silk Road railway under China’s ‘One Belt One Road’’, The Mainichi, October

15, 2018. 64 On this issue, the well-known Japanese expert noted as follows:

“If we decide as a basic principle that the recently discussed cooperation between Japanese and Chinese

companies in the Indo-Pacific will contribute to the development of emerging nations in that region, there is no

reason for Japan to hesitate with our cooperation. …..Also, if such joint projects influence the actions of Chinese

companies, it may contribute to a change in the Chinese model itself.” See Akihiko Tanaka, ‘Changes to the

international system due to the rise of China. From trade wars to a “new Cold War.”’ Diplomacy, No.51 Jan. 14,

2019. Available at: https://www.japanpolicyforum.jp/archives/diplomacy/pt20190114014015.html 65 See Tobias Harris, ‘Quality Infrastructure: Japan’s Robust Challenge to China’s Belt and Road, APRIL 9, 2019,

Special series – Southern (Dis)comfort. “Maybe the United states and other countries will only be able to influence

China’s efforts on the margins, but, as Japan shows, even limited engagement could challenge China and its

businesses to aspire to higher standards.” 66 Daniel Kliman and Abigail Grace, ‘Power Play: Addressing China’s Belt and Road Strategy,’ September, 2018.

Available at: https://s3.amazonaws.com/files.cnas.org/documents/CNASReport-Power-Play-Addressing-Chinas-

Belt-and-Road-Strategy.pdf?mtime=20180920093003 67 Andre Wheeler, ‘Japan’s trade engagement with China – is Myanmar a case study?’, November 1, 2018.

Available at: https://www.joc.com/regulation-policy/trade-policy/international-trade-policy/japan’s-engagement-

china-–-myanmar-case-study_20181101.html 68 Remarks by Ambassador Lu Shaye, supra note 32. 69 See Wu Hao, ‘Exploring Third-party Markets through BRI,’ China Today, 22 February 2019. Available at:

http://www.chinatoday.com.cn/ctenglish/2018/ii/201902/t20190222_800157434.html 70 Earlier, there were long-term settlements with east and west European firms in a wide area of activities, and

one of them are cooperation (production and marketing) in third markets. See Iliana Zloch-Christy, East-West

Financial Relations: Current Problems and Future Prospects, p.63, CUP 2010; Another example, Chile concluded

so-called ‘Closer cooperation agreement to improve products competitiveness in the third markets’ after 2003

with Singapore and New Zealand. More recently, for instance, Japan and the US also concluded such agreement

to support US-Japan cooperation on energy infrastructure in third countries in November 2017. See Memorandum

of Cooperation between the Ministry of Economy, Trade and Industry Government of Japan and the United States

Trade and Development Agency to Support Japan-U.S. Cooperation on Energy Infrastructure in Third Countries.

Available at: http://www.meti.go.jp/press/2017/11/20171107002/20171107002-2.pdf

16

Japan (2018), Germany (2019), Italy (2019), Luxembourg (2019), and finally, with Holland

(2019).71

China is also in pursuit of attracting reputed international organizations in its 3PMCA

web. For example, the European Bank for Reconstruction and Development (EBRD) and the

China International Contractors Association signed the MoU in 2018. They underscored to

develop their cooperation and continue to forge synergies on investments in third-party markets

that are EBRD countries of operations and are part of the BRI.72

4.2 Normative Content of China’s 3PMCAs

Notably, many of the 3PMCAs are not accessible to the broader public, thus, making it

impossible to analyze their normative content.73 France was the first EU member country to

sign the 3PMCA with China. In the Joint Declaration between China and France on the

partnerships in third-party markets on June 30, 2015, all parties agreed to play a dominant role

of companies with the support of public authorities and to comply with international law,

international practices and relevant commercial principles, as well as laws and regulations of

France, China, and third countries. To construct a close, durable, and comprehensive Sino-

French economic strategic partnership, after three years, the China-France Joint Fact Sheet on

the 6th High-Level Economic and Financial Dialogue further upgraded underlying principles

of cooperation in third markets and infrastructure connectivity.

Parties stressed that,

“….cooperation should abide by the shared principles of market rules, transparency,

sustainable economic development, open procurement and a level playing field for all investors,

and comply with established international norms and standards, respective international

obligations, as well as the law of the countries benefitting from the projects, while taking into

account their policies and individual situations.”74

To Chinese policy-makers, exploring third-party market cooperation could yield benefits

without causing a clash of interests in projects involving China, France, and some French-

speaking African countries.75 However, until now, the Sino-French collaboration has focused

on potential cooperation only in a developed country, Hinkley Point - Britain’s first nuclear

power plant station.

Italy, the first member among the G7 countries to endorse the BRI by concluding MoU

with China, also dealt with cooperation in third countries. 76 More importantly, they also

highlighted the importance of open, transparent, and non-discriminatory procurement

procedures. Regarding cooperation in the third countries,

71 In addition, in 2013, China had already offered such agreement to India as well to enhance bilateral trade

cooperation aiming at third country markets. 72 Anthony Williams, ‘EBRD to step up cooperation with China and EU on Central Asia investment, November

14, 2018. Available at: https://www.ebrd.com/news/2018/ebrd-to-step-up-cooperation-with-china-and-eu-on-

central-asia-investment-.html 73 For instance, Australia, Singapore governments have not yet opened these agreements for public. In case of

Australia, it was due to Chinese government’s request. 74 See China-France Joint Fact Sheet on the 6th High Level Economic and Financial Dialogue, December 7th,

2018, Paris. 75 Zheng Xin and Zhong Nan, ‘Third-party market cooperation welcome,’ ChinaDaily 28 August 2018. Available

at: https://www.chinadailyhk.com/articles/203/59/197/1535420480758.html 76 Memorandum of Understanding between The Government of the Italian Republic and the Government of the

People’s Republic of China on Cooperation within the Framework of the Silk Road Economic Belt and the 21st

Century Maritime Silk Road Initiative, March 2019, Rome. Available at:

http://www.governo.it/sites/governo.it/files/Memorandum_Italia-Cina_EN.pdf

17

“The Parties will jointly explore opportunities of cooperation in Italy and in China and discuss

cooperation in third Countries. The Parties are committed to modes of cooperation that are

advantageous to all participants and to projects that benefit third Countries by supporting their

priorities in terms of development and the needs of their people, in a fiscally, socially,

economically and environmentally sound and sustainable manner.” (Paragraph Ⅲ)

Somehow, similarly, the Joint Statement of the 2nd China-Germany High-Level Financial

Dialogue also echoed” cooperation in third countries based on transparency and sustainability.

…. decisions … made by enterprises and financial institutions based on commercial criteria.”

(Paragraph 12)77

On April 29, 2019, Swiss and Chinese side agreed to,

“recognize that the cooperation should be enterprise-led, market-based, in compliance with

international practices and norms, as well as the laws and policies of the countries benefitting

from such cooperation. This cooperation should be based on economic viability and long-term

sustainable growth, social and environmental sustainability, mutual benefits, consensus,

inclusiveness, open and non-discriminatory procurement processes and a level playing field,

in line with national development priorities as devised by the countries concerned and with the

common pursuit of the UN Sustainable Development Goals.” (Paragraph 2)78

Furthermore, agreement with multilateral banks, such as the EBRD, is also noteworthy for this

paper. According to the agreement,

“The cooperation is intended to contribute towards the improvement of the economic, social,

fiscal, financial and environmental sustainability of Europe-Asia connectivity, while abiding

by the shared principles of market rules, transparency, open procurement and a level playing

field for all investors.”79

Above excerpts from the 3PMCAs show how the EU is trying to conclude sophisticated

instruments with China. Although the agreement notes with Italy and Switzerland do not

constitute an international agreement that may lead to obligations under international law and

discourage parties to vigorously implement provisions of the MoU, they are noteworthy in two

aspects: First, MoUs on 3PMCA may have some soft and diplomatic pressure on China, paying

attention to the fiscal and environmental soundness and sustainable-ness of the infrastructure

project in a third country. Second, beginning with France, there is gradual enrichment of the

normative contents in the 3PMCAs with China. If China and France initially referred to

“compliance with international law, international practices, and relevant commercial

principles,” step-by-step international organizations and western developed nations succeeded

in inserting powerful principles such as “transparency,” “open procurement,” and “level

77 Joint Statement of the 2nd China-Germany High Level Financial Dialogue, January 18, 2019, Beijing. Available

at: https://www.bundesfinanzministerium.de/Content/FR/Downloads/2019-01-18-D-C-Finanzdialog-

Statement.pdf?__blob=publicationFile&v=2 78 Memorandum of Understanding on Developing Third-Party Market Cooperation between The Federal

Department of Finance and the Federal Department of Economic Affairs, Education and Research of the Swiss

Confederation and the National Development and Reform Commission of the People's Republic of China, April

29, 2019 Beijing. Available at: https://www.newsd.admin.ch/newsd/message/attachments/56683.pdf 79 Williams, supra note 72.

18

playing field.” This shows that at least on a soft law level, there is a way to concede China to

abide with high-level international rules.

4.3 China-Japan 3PMCA and 2018 Beijing Third Party Market Cooperation Forum

On May 9, 2018, Japan and China signed the Memorandum on Business Cooperation in Third

Countries.80 Compared to the Sino-Italy MoU, the Sino-Japan Memorandum seems short,

consisting of only four short paragraphs. First, both parties noted strong complementarities of

their companies overseas and that developing their business cooperation in third countries

would also benefit such countries. Second, as a working mechanism of this cooperation, the

parties decided to establish the Committee for the Promotion of Japan-China Business

Cooperation in Third Countries under the framework of the Japan-China High-Level Economic

Dialogue. Third, both countries agreed to hold the Japan-China Forum on Third Country

Business Cooperation, based on private-sector economic cooperation in third countries. Finally,

both sides would hold discussions toward the formulation of possible specific projects, under

the above frameworks.

Initially, compared to China’s 3PMCAs with western European countries, Japan could

only conclude very dry soft law tools. Nonetheless, the Sino-Japanese 3PMCA is very different

for a few reasons. Although China and its SOEs have already singed several joint projects in

the third countries under the 3PMCAs, the one with Japan will be its first and large-scale joint

project in a third developing country. For example, the Sino-French Third-Party Cooperation

on the Hinkley Point C nuclear power station or China’s CRRC and Germany’s Siemens’ third-

party cooperation in some key projects. However, none has been realized yet. The large-scale

and wide scope of the Sino-Japanese third-party market cooperation is unprecedented.81

Five months after the agreement, both parties successfully held the first China-Japan

Third-Party Market Cooperation Forum in Beijing in October 2018. Approximately 1,500

people, including leaders from political and industrial circles of both countries, attended

ceremonies, comprising a total of 52 memorandums of cooperation, that were concluded

between both the public and private sectors in a wide range of fields. 82 As part of the

cooperation, the Japanese contractor JFE Engineering Corporation and a Chinese enterprise

agreed to develop an energy-efficient smart city in Thailand. Japanese trading house Itochu

Corporation agreed to expand investment in an offshore wind power generation project in

Germany with China’s state-owned CITIC Group Corporation. The Japan Bank for

International Cooperation and the China Development Bank decided to launch a scheme to

finance infrastructure projects in third countries jointly.83

Although Abe announced that the Japanese government would work together with the

Chinese to facilitate projects that can also benefit third countries in line with international

standards in terms of openness, transparency, economic efficiency, and financial soundness.

Following him, Premier Li expressed high hopes for China and Japan to conduct cooperation

in third countries by taking advantage of their mutually complementary strengths and

implementing projects that will be beneficial for all parties; however, being cautious, the

parties carefully avoided referring to their initiatives as well as those of the others.

Private sector collaboration in a third market on specific projects and under the aegis

of several cooperation mechanisms are emphasized as specific characteristics of the Japan-

80 METI, Japan and China Conclude Memorandum on Business Cooperation in Third Countries, May 10, 2018.

Available at: https://www.meti.go.jp/english/press/2018/0510_003.html 81 Shen Shivei, ‘Opinion: What is the goal of China-Japan third party cooperation?’, October 27, 2018. Available

at: https://news.cgtn.com/news/3d3d674d7859544d30457a6333566d54/share_p.html 82 For the full list of MoUs, visit https://www.meti.go.jp/press/2018/10/20181026010/20181026010-1.pdf 83 METI, ‘52 MOCs Signed in Line with Convening of First Japan-China Forum on Third Country Business

Cooperation,’ 26 October 2018. Available at: https://www.meti.go.jp/english/press/2018/1026_003.html

19

China 3PMCA. Japan could also place its participation under the strict conditions of openness,

transparency, economic efficiency, and financial soundness of every joint infrastructure

projects. Furthermore, co-working with China in BRI-related projects provided the Japanese

side an opportunity to propose China to proactively participate in rulemaking.84

Moreover, it seems that the Japanese side began to pursue economic-pragmatism

through participation in BRI projects.85 Because, as (Jinhxia) Shi rightly pointed out, “the sheer

size of the investment required means that Chinese investors are increasingly looking for

foreign partners to collaborate on projects”86 and it is progressing in practice. According to

reports, the cooperation between the Chinese and other countries’ enterprises is occurring in

many parts of the world. Chinese and Canadian nuclear energy enterprises have successfully

cooperated in third-party markets, including Romania, Argentina. 87 Japanese and Chinese

companies are relying on each other in the Middle East markets and are eager to cooperate in

South East Asian markets, such as Thailand. According to Kanaoki, among the 52 memoranda

concluded during the 2018 China-Japan Third Party Market Forum in Beijing, some are already

ongoing projects.88 For instance, a few cases of Chinese and Japanese business cooperation in

a third country were listed, including a petrochemical project in Kazakhstan involving Sinopec

and Marubeni and an offshore wind energy project in Germany jointly developed by CITIC

and Itochu. Moreover, as bluntly posted on the homepage of the Chinese embassy in Thailand,

with more bargaining power, Japan and Chinese companies may gain “more support in

preferential policy, infrastructure connectivity, human resources.”89

The cooperation has already began yielding results. For instance, in the case of

Thailand’s Eastern Economic Corridor Program (EEC program), the host state welcomed the

Sino-Japanese cooperation in their territory and in the same month, Japan and China signed in

the MoU, both sides’ embassies held a trilateral seminar on “China-Japan Cooperation on the

Eastern Economic Corridor of Thailand” in Bangkok.90 After a year, it seems that movements

have already begun between Sino-Japanese corporations for five infrastructure projects in the

flagship project of the Thai government.91As a showcase of the Sino-Japan third-party market

cooperation, Chinese and Japanese sides held their first Workshop on Business Cooperation in

Thailand on the April 2, 2019.92 However, for this topic, it is essential for both sides’ financial

institutions (JBIC, China Development Bank and China EXIM Bank) to have already started

84 For instance, during his speech in the Forum, JETRO Chairman and CEO Hiroyuki Ishige stressed the

importance of developing a free and fair business environment and urged China to take a leading role in

international rule-making and the steadfast implementation of those rules. See Jetro Topics, ‘1st Japan-China

Third Country Market Cooperation Forum at the Great Hall of the People in Beijing on October 26’ Available at:

https://www.jetro.go.jp/en/jetro/topics/2018/1810_topics11/message.html 85 Hidetaka Yoshimatsu, (2019) ‘Partnership against the rising dragon? Japan’s foreign policy towards India,’ The

Pacific Review, pp.1-27. 86 Shi, supra note 9, at 25. 87 Remarks by Ambassador Lu Shaye, supra note 31. 88 Kanaoki Tsukio, ITTAI ICHIRONI KAKAWARU NIHONKIGYOUNO ARATANA SHOUKINO

KANOUSEI[The possibility of new commercial chances for Japanese corporations that collaborate with BRI],

BOUEKITO KANZEI, VOLUME 790, 2019, JANUARY. 89 ‘Seminar on ‘China-Japan Cooperation on Eastern Economic Corridor of Thailand" Held in Bangkok’, June 1,

2018. Available at: http://www.chinaembassy.or.th/eng/dszl/dshd/t1564718.htm 90 EEC Press News, ‘China – Japan Cooperation on the Eastern Economic Corridor of Thailand,’ May 31, 2018.

Available at: https://www.eeco.or.th/en/pr/news/china-–-japan-cooperation-eastern-economic-corridor-thailand 91 See Piyachart Maikaew, ‘Japanese, Chinese company reps to be 'matched' with EEC,’ Bangkok Post, March 22

2019. Available at: https://www.bangkokpost.com/business/news/1649400/japanese-chinese-company-reps-to-

be-matched-with-eec 92 Japan-China Workshop on Business Cooperation in Thailand, March 20, 2019. Available at:

https://www.jetro.go.jp/thailand/topics/_435975.html

20

working on bankable projects in Thailand on the conditions of global standards of openness,

economic viability, compliance with laws, transparency, and debt sustainability.93

As expected, Thailand “emerged as a major beneficiary” of the Forum, according to the

South China Morning Post, with multiple Thai-focused deals (smart city development, high-

speed rail, etc.) included in the China-Japan agreement.94 Such a trilateral agreement may

generate several positive effects for all parties. First, since the 2018 Forum in Beijing produced

an agreement between the Japan Bank for International Cooperation and China Development

Bank to provide joint loans to infrastructure projects overseas, Japan can also control whether

a debt-trap problem is not occurring in host countries like Thailand. Second, parties may form

complementary advantages of each other. With their strength in investment feasibility studies,

risk management, and corporate social responsibility issues, Japanese corporations may not

only bar Chinese counterparts from conducting illicit transactions that negatively affect local

communities but also strengthen their consciousness on corporate social responsibility. Despite

its soft law and less-institutionalized nature, the China-Japan 3PMCA Working Mechanism, if

effectively implemented, can provide Japan some new tactics to restraint harmful economic

activities of Chinese companies in the third markets.95 Third, more cooperation leads to more

trust on each other. Therefore, Japan and the other G20 countries are highly encouraged to

engage with Chinese companies in developing countries’ market actively.96 Thus, Thailand’s

EEC program, which stands at the center of Japanese outward investment destination, will be

a test for China and BRI-suspicious countries. Nevertheless, strengthening the 3PMCA from

soft law to hard law and upgrading its substantive content and institutional architecture is a

daunting task for the Japanese side.97

4.4 Improving the international economic governance of regional connectivity initiatives To evaluate the synergy between BRI/Facilities connectivity and FOIP/Quality infrastructure,

Japanese “stubbornness” on quality infrastructure based on bankability and sustainability of

93 See presentation materials: Japan Bank for International Cooperation, ‘Collaborations between JBIC and China

Governmental Financial Institutions in Third Country Markets’, April 2, 2019, Bangkok, Thailand. Available at:

https://www.jetro.go.jp/ext_images/thailand/thailand/pdf/DocumentsJapaneseCompanies.pdf 94 Lee Jeong-ho, ‘Why Thailand could be the big winner as China and Japan start to work together,’26 October

2018, South China Morning Post. Available at:

https://www.scmp.com/news/china/diplomacy/article/2170391/why-thailand-could-be-big-winner-china-and-

japan-start-work 95 See Lee Jeong-ho, ‘Why Thailand could be the big winner as China and Japan start to work together,’ October

26 2018, South China Morning Post. However, China and Japan may have differing agendas, and analysts argued

that the investments may offer Japan a new tactic for limiting China’s influence over the region. “The joint

development with China implies Japan is indirectly helping the [belt and road] by developing smart cities in

Thailand,” said Kotaro Tamura, an Asia fellow at the Milken Institute and a former parliamentary secretary in

charge of economic and fiscal policy at Japan’s Cabinet Office. “But Japan will check both Chinese government

and business activities in Asean through mutual collaboration.” Available at:

https://www.scmp.com/news/china/diplomacy/article/2170391/why-thailand-could-be-big-winner-china-and-

japan-start-work 96 Zhou Yongsheng, ‘China and Japan Promote Third-Party Market Cooperation With Optimistic Outlook,’ China

Today, October 28, 2018. Available at: http://www.cnfocus.com/china-and-japan-promote-third-party-market-

cooperation-with-optimistic-outlook/ arguing that ‘[i]f China and Japan can make good use of this new growth

point, even though it cannot become the leading process and direction for the improvement of Sino-Japanese

relations, it will indeed help China and Japan deepen their understanding of one another, increase trust and dispel

doubts, as well as expand the external growth space of bilateral relations.’ 97 Because even with similar instruments concluded between Japan and the US, any dispute about the

interpretation or implementation of the Memorandum should be resolved through consultations between the

participants. See Memorandum of Cooperation between the Ministry of Economy, Trade and Industry

Government of Japan and the United States Trade and Development Agency to Support Japan-U.S. Cooperation

on Energy Infrastructure in Third Countries. Available at:

http://www.meti.go.jp/press/2017/11/20171107002/20171107002-2.pdf

21

projects eventually led China to implicitly admit the biggest deficiencies in the BRI. For

instance, high-ranking Chinese official Wei, an important promoter and planner of the China-

Japan third-party market cooperation, also noted that this is the first time for the two sides to

publicly announce details of all cooperative projects. It was also a response to international

scholars’ concerns on the transparency, source of funds, and return on investment of projects

under the BRI.98 Furthermore, in April 2019 Joint Communique of the Leaders’ Roundtable of

the 2nd BRI Forum by explicitly referring to “high quality” several times, almost repeated the

standards launched by the “Quality infrastructure” proposed by Japan.

“Looking into the future, we envisage high-quality Belt and Road cooperation….. We will

strive to build high-quality, reliable, resilient and sustainable infrastructure. We emphasize

that high-quality infrastructure should be viable, affordable, accessible, inclusive and broadly

beneficial over its entire lifecycle, contributing to sustainable development of participating

countries and the industrialization of developing countries. …. In the interest of sustainability,

we support improving cooperation in project preparation and implementation, to promote

projects that are investable, bankable, economically viable and environment-friendly.”99

China also began using the term “high-quality” in tandem with the BRI with countries in the

BRI. 100 This significant change in China’s behavior toward high-quality, bankable, and

sustainable infrastructure projects can be considered a huge diplomatic success of high-quality

standards posed by the FOIP/QII. Nevertheless, such verbal assurance by Chinese leadership

may not provide a guarantee for the successful implementation of the Sino-Japan 3PMCA; it

requires continuous upgradation.

Against this background, the author suggests the following recommendations for

policymakers to ensure the success of QII in the future.

Recommendation 1: Multilateral-izing and enriching the content of 3PMCA

For success, the so-called China’s “Third Party Market Cooperation” agreements network can

be strengthened from soft law to hard law with the participation of host states and multilateral

development banks or continue concretization of the China-Japan 3PMCA. In other words,

under the China-Japan Third-Party Market Cooperation Working Mechanism, Japan should

strive to enrich the content of the MoU concluded through learning from Western European

countries’ experience. Compared to the Sino-Japan MoU on 3PMCA, those of Western

developed states excel at their sheer normative content, novel schemes, and transparency.

While Japan also could specify its own four conditions, simultaneously developing a

framework of China’s 3PMCAs with developed nations signals the possibility of its renewal

in the future. Based on the success of the Thai experience, the 3PMCA may also develop into

a legally binding treaty in the future. In that sense, forthcoming the Second Forum for the Third

Party Market Cooperation between Japan and China in the next year may play a meaningful

role for multilateral-izing and enriching the content of 3PMCA.101

98 See ‘China-Japan third-party market cooperation not limited to B&R, official’, November 7, 2018. Available

at: https://eng.yidaiyilu.gov.cn/ghsl/wksl/70953.htm 99 Belt and Road Cooperation: Shaping a Brighter Shared Future Joint Communique of the Leaders’ Roundtable

of the 2nd Belt and Road Forum for International Cooperation, 27 April 2019, Beijing, China. Available at:

http://www.beltandroadforum.org/english/n100/2019/0427/c36-1311.html 100 See Xinhua, ‘Xi asks China, Uzbekistan to promote quality Belt and Road construction’, August 28, 2019.

Available at: http://www.xinhuanet.com/english/2019-08/28/c_138345803.htm 101 Daisuke Suzuki, ‘Japan and China to hold infrastructure forum during Xi visit,’ Nikkei Asia Review,

September 16, 2019.

22

Figure 1. Image of multi-party 3PMCA with Thailand

Recommendation 2: Diffusing QII in collaboration with global partners

At this point, the significance of the continuity of QII diplomacy by Japan without any breaks

should be emphasized. Working with donor-partner countries in the third markets and pushing

China to actively endorse the principles of sustainable, comprehensive, and international rules-

based connectivity only serve to strengthen international economic governance on mega-

infrastructure-connectivity projects. Adoption of the EU’s new central Asian strategy, which

included “quality infrastructure,” can be considered a successful story of close EU-Japan

collaboration on QII rule-making and its further dissemination in the globe.102 By closely

collaborating with interested parties, such as France and other EU states, Japan should urge

China to become a member of the Paris Club and fairly share the global burden of debt

restructuring.103

Nonetheless, as noted “the idea[FOIP/QII] has been badly promoted and remains poorly

understood across Asia.”104 It has no annual summit, no dedicated home page, and even Abe’s

critical speech at the “Third party market cooperation forum” in Beijing is yet to be translated

into English; in his speech, the Japanese leader proposed the primary conditions of

collaboration between Japan and China.105 Furthermore, since there is no official document

that openly recognizes QII as part of the FOIP or vice-versa, both concept’s bilateral

connection remains vague. Therefore, while clarifying the FOIP/QII relationship through new

ways of promoting activities, Japan should actively continue to promote QII not only in donor

102 See Council Conclusions on the New Strategy on Central Asia, 17 June 2019. Available at:

https://www.consilium.europa.eu/media/39778/st10221-en19.pdf 103 See Masahiro Kawai, Japan’s G20 Presidency for 2019: Potential Agendas and Issues, Pensamiento Propio,

«El G20 en tiempos inciertos: Reflexiones en torno a la presidencia argentina» p.193. Available at:

http://www.cries.org/wp-content/uploads/2018/11/014-Kawai.pdf 104 See James D.J. Brown, ‘Promoting Japan’s answer to China’s Belt and Road: To compete with Beijing, Tokyo

must go out and market the free and open Indo-Pacific brand,’ Opinion, Nikkei Asia Review, April 25, 2019. 105 See Third country market cooperation forum, the text of the Speech of Prime Minister Abe, October 26, 2018

(in Japanese). Available at: https://www.kantei.go.jp/jp/98_abe/statement/2018/1026daisangoku.html

Thai EEC

China

BRIThailand

↓

MDBs

Japan

FOIP

↑

Capacity building forlocal legal

professionals

23

countries forums but also in recipient countries in cooperation with other donors as well. We

should also acknowledge success stories of Japan in this direction. In early 2019, during his

central Asian visit, Foreign Minister Taro Kono invited his counterparts in that region to adopt

QII in infrastructure imports from donor countries,106 Japan also strived to widespread QII to

African continent in the 7th Tokyo International Conference on African Development that was

held in Yokohoma in September 2019.107

Recommendation 3: Operationalizing local capacity

Finally, in contrast to the top-down approach of China-Japan-Thailand Trilateral Partnership

at the EEC program, Japan can also offer a bottom-up approach. This refers to the activation

of Japan’s soft power under its Official Development Assistance. Notably, Japan is the only

country in Asia that can compete and outperform any nation in the legal assistance and

education at present. Characterized by a tight focus, sustainable funding by the Ministry of

Education, Culture, and Sports, and veteran staffs with more than 20 years of rich experience,

Japan may strategically use its soft power against unfair practices of Chinese companies abroad.

With its satellite legal education and research centers established in the leading state

universities of Mongolia, Uzbekistan, Vietnam, Cambodia, and Laos, Japan has already shown

a reliable performance of nourishing hundreds of young jurists within the BRI countries; this

can be a very formidable force of law enforcement against unfair players in their homeland. In

other words, a large community of Japan’s university law faculty alumnae/alumni originating

from ASEAN—especially from Vietnam, Cambodia, and Lao—can play a very significant role

in filtering the proposed infrastructure projects considering their national interest. Japan should

be more proactive with the BRI countries with the focus of capacity building and education of

specific legal fields. Only with the support of the “invisible hand” of highly educated jurists in

Japan may persuade China to implement obligations fairly under the 3PMCA in host countries.

5. Conclusion

This paper examined the possibility of improving the governance of BRI through China-Japan

collaboration in third-party country markets as well as the contribution FOIP/QII. The author

argued that one of the constructive ways for developed nations to deal with Chinese initiative

is not by demonizing it, but by endorsing the BRI, both private or public, either directly or

indirectly, and collaborating with Chinese companies in third-country market based on market

rules and high quality standards (conditional approach). Although being a soft law that lacks

stringent enforcing mechanism, the principles of quality infrastructure represent the collective

intent of rule-setting under G20. Therefore, they have great potential in influencing state

practices in procuring infrastructure projects. In addition to QII, China’s bilateral 3PMCAs

further enhance market rules and high standards in particular countries. This approach has the

potential to lead the reforming of the BRI from the inside and the Second BRI Forum in Beijing

has already shown some concrete signs.

Two years ago, a young lawyer warned the world that “the lack of other truly

competitive sources of foreign financing is what ultimately reinforces China’s monopolistic

106 Foreign Minister Kono Attends the Seventh Foreign Ministers’ Meeting of the “Central Asia plus Japan”

Dialogue, Dushanbe, Tajikistan, May 18, 2019. Available at:

https://www.mofa.go.jp/region/europe/eu/page6e_000187.html 107 Because of the Japanese government’s effort, 7th conference of TICAD adopted “Yokohama Declaration 2019”

and “Yokohama Plan of Actions 2019”; both documents referred to the “quality infrastructure” several times. For

the TICAD 7 outcome documents, visit following home page:

https://www.mofa.go.jp/region/africa/ticad/ticad7/index.html

24

advantage over foreign-financing of infrastructure and connectivity projects.”108 The scale of

financial support from Japan or any other developed nation cannot match Chinese economic

statecraft in BRI-projects in two aspects: volume and velocity.109 The BRI differs from the

FOIP in the sense that the former encompasses complete foreign policy of China, whereas the

latter only covers foreign relations of Japan partially. However, with their formidable and well-

thought approach, Japan’s FOIP/QII standards successfully challenged the BRI/Facilities

connectivity in multilateral fora. These efforts and worldwide critique of BRI led Chinese

leaders to re-think the quality and sustainable-ness of BRI projects. Xi Jinping’s emphasis on

“high-quality, sustainable, resilient, affordable, inclusive and accessible infrastructure projects”

in his speech during the second BRI Forum in Beijing clearly shows how Chinese leaders began

focusing on those concerns.110 However, whether this collaboration will lead to improved

governance in big infrastructure projects alongside the BRI, will be determined in the future.

In conclusion, it may be ironic that the biggest beneficiary of penetration of QII as an

international economic rule is China itself. In the last two years, familiar academicians, as well

as policymakers, have highlighted how domestic groups are unsatisfied with the inefficiency

and non-transparency of BRI projects; urgent efforts are needed. Similar to the WTO, the QII

and effective cooperation under the 3PMCA can be powerful tools for reformers inside China.

Aspiring “to control the potential costs and risks of causing social frictions and legal liabilities

with local citizens” of BRI countries, China has shown enthusiasm in adherence to best

international practices.111Therefore, rather than putting pressure from the outside, creating a

demand within China to endorse high-quality standards of connectivity is also one of the

decisive factors to diffuse QII broadly.

108 See Diane Desierto, (2017) ‘China’s ‘One Belt, One Road’ Initiative: Can A Bilaterally-Negotiated

‘Globalization 2.0’ Internalize Human Rights, Labor, and Environmental Standards?’, EJIL: Talk. 109 Takahara Akio, SEMARU CHUGOKU ‘SHA-PU-WA-’: NIHON, KIHANJUNSHU WO

UTTAEYO,[Pressing China’ Sharp Power: Japan should appeal to observance of rules] Nihonkeizaishimbun,

October 16, 2018. 110 The complete text of President Xi Jinping’s speech at the Belt and Road Forum for International Cooperation

2019. Available at: http://www.cpecinfo.com/news/the-complete-text-of-president-xi-jinping-speech-at-the-belt-

and-road-forum-for-international-cooperation-2019/NzAwMQ== 111 See Noriaki Abe, International “Soft-law” Evolving in Southeast Asia, Implications for Better-functioning

Global Governance: Cooperation between the ASEAN and the OECD on Responsible Business Conduct, the

Japan Chapter of the Asian Society of International Law

The 10th Anniversary Annual Conference, July 14, 2019, Conference paper, pp. 26-27.